Morning Coffee: The 24 year old hedge fund genius hits a speed bump. The low paid career that’s better than banking

There’s “hitting a speed bump” and “hitting a speed bump so hard that you smash the chassis of your car”. Unfortunately, it seems that Leopold Aschenbrenner and the seven other employees of Situational Awareness are in the second situation. Having raised $1.5bn back in 2025, then quickly run it up to $40bn through a combination of performance and further inflows, Aschenbrenner’s AuM is now back down to $10bn.

What went wrong? The only thing that can do that sort of damage that quickly is leverage. Apparently, Situational Awareness had used borrowing to increase its exposure to AI stocks, boosting returns on the way up. But the thing about margin borrowing is that it has a tendency to turn into margin calls, and with the memory of Archegos still fresh, the fund’s prime brokers (particularly Goldman Sachs and JPMorgan) were quick to take action when some of its bets turned sour.

As the proverb goes, “the faster the speed, the bigger the mess”. Apparently one of the things that has been weighing on the whole NASDAQ market was the possibility that Aschenbrenner’s portfolio might need to be liquidated. Instead, a deal was found in which Citadel took most of its $16bn of publicly traded equities in one lump. Terms of that deal haven’t been announced, but it’s likely that there was a significant discount; Citadel might even have been able to hedge the risk if it could find an ETF with sufficient overlap between its holdings and the SA portfolio.

Compared to previous margin call episodes, it looks like the system worked this time. The prime brokerages were quick to identify and manage the risk, and the conventional hedge fund industry was able to mobilise resources quickly to stop any contagion to the wider market. All that’s left is another lesson in maybe not giving your hedge fund a name that’s going to sound quite so funny when things go bad.

Of course, without the name, there might never have been a fund. Aschenbrenner came to fame as the result of writing an article on the future of AI called “Situational Awareness”. Or rather, he came back to fame - he’d previously managed the FTX Future Fund, the philanthropic arm of Sam Bankman-Fried’s company. And then he had been a researcher at OpenAI before getting fired.

So it seems that the 24-year-old genius is pretty good at bouncing back, even from situations others might regard as career ending. (And it’s not as if Situational Awareness is down or out; it still has a pre-IPO stake in Anthropic, and the fees on $10bn of assets under management are still pretty good when split between a very small investment staff). Perhaps Leopold Aschbrenner has just paid the most expensive tuition fees in history for a quick lesson in the importance of risk management.

Elsewhere, young people in finance often laugh at the concept of work/life balance. To a certain extent, by choosing a career in banking, you have already made your choice with respect to that tradeoff. But what if it’s the wrong choice?

One Instagram careers influencer is trying to help people who are beginning to wonder if they are in exactly that situation. “Thatyoungprofessional” is the account of a young woman who quit a career in private equity and insurance, and became a civil servant.

Obviously, making that sort of move is a significant step down in earnings. But being a diplomat or policy advisor is not exactly a vow of poverty - it’s still a decent middle-class salary. And government jobs tend to have quite generous leave allowances and the expectation that you will actually take the holidays. 

So for a young person with a taste for fun, the choice might actually be between modest treats that you can actually have all the time, and really fantastic theoretical treats that you end up having to cancel. As long as you don’t have owning property in a major world city as an important part of your life plan, the choice might be more finely balanced than one might think.

Meanwhile…

If you think you’ve made a terrible mistake about work/life balance, but it’s too late in life to quit and become a civil servant, you might end up paying $4,000 for a retreat organised by “Punks and Pinstripes” where you can do pottery while talking to other partially burned out executives about how draining it all is, and your daydreams of opening a hardware store. (WSJ)

Nick O’Kane was one of the highest rolling traders in the world when he was taking home $39m paychecks as head of commodities at Macquarie. He left a couple of years ago to join a Swiss trading house called Mercuria, and now he’s left there too, apparently for personal reasons. (AFR)

The local heroes of the Indian market, Kotak Investment Banking, have appointed V Jayasankar and Sourav Malik to be co-CEOs. (Bloomberg)

With revenues down 16% on the same time last year and visible knock-on effects from the geopolitical uncertainty in the Gulf, Houlihan Lokey’s H1 results were showing the kind of trends that might have been predicted for the whole industry back in January.  The issue appears to be that as a mid-market specialist, they haven’t been playing in the megadeals that have driven overall revenues, and as CEO Scott Adelson puts it, “the party hasn’t got started” (Financial News)

There really aren’t many genuinely elite PhDs every year in mathematics and computer science. Currently, about a third of them go into finance, a third go to tech firms and the rest stay in academia. But with such a tight supply constraint and potentially huge profits from the right algorithms, their compensation is being bid up; seven figure starting salaries are now common. According to some graduates, high-frequency trading is still the best payer. (WSJ)

The CEO of a small AI startup offered to give a job interview to anyone who got a tattoo of its logo. Seven people took him up on the offer, and now he has “posted and deleted several apologies”. (Business Insider)